MGCR 293 Lecture Notes - Demand Curve, Indifference Curve, The Intercept
7 Dec 2012
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Chapter 3: theory of consumer behaviour & rational choice. The basic model of consumer behavior focuses on 2 important factors influencing consumer behavior. Second goods. is the ability of consumers to acquire goods as determined by income and prices of the is the consumers" preferences(willingness), or tastes over various combination of goods. The theory follows directly from the theory of constrained maximization. We assume that our consumer is rational and wishes to maximize his/her well being which is a function of the goods he/she consumes. However, the amount of goods she can consume will be constrained by her income, given the. We"ll develop the concepts of utility functions, indifference curves and budget lines and prices of goods, their tastes and preferences for goods and given their income. from this we"ll derive the consumer demand curve for a good. We show how the consumer"s demand shifts when income changes.
